CIC Insurance Ltd v Bankstown Football Club Ltd S111/1995 [1997] HCATrans 242 (14 August 1997)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S111 of 1995

B e t w e e n -

CIC INSURANCE LIMITED

Appellant

and

BANKSTOWN FOOTBALL CLUB LIMITED

Respondent

Application to vary order

BRENNAN CJ

TOOHEY J

GAUDRON J

GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 14 AUGUST 1997, AT 10.28 AM

Copyright in the High Court of Australia

MR J.B. SIMPKINS: If the Court pleases, I appear for the respondent to the appeal who is the applicant on the motion. (instructed by Thomas Tarmo & Co)

MR B.W. RAYMENT, QC: May it please your Honours, I appear with my learned friend, MR J.G. DUNCAN, for the appellant, now respondent. (instructed by Abbott Tout)

BRENNAN CJ: Yes, Mr Simpkins.

MR SIMPKINS Your Honours, I move on the notice of motion filed on 27 March this year. That motion seeks to agitate three matters. Those matters are referable to firstly, business interruption and loss payable pursuant to the policy; secondly, the cost of the appeal to this Court and, thirdly, the question of general damages for breach of the policy of insurance. Can I deal with the three matters in that order.

So far as the business interruption loss aspect of the motion is concerned, that was dealt with in orders made by the Court of Appeal. Those orders appear in the appeal book to this Court, volume 2, at page 579. The order which the respondent to the appeal, my client, seeks to have reinstated is the order which appears at page 580 being order 3(a)(iii) at about line 10. The provisions of the policy provided for business interruption loss for a period of up to 12 months after an event of loss.

Your Honours may recall that the first event of loss was the first fire which occurred on 8 January 1992 and the effect of order 3(a)(iii) was for the period of 12 months after the date of the first fire. The respondent was awarded by the Court of Appeal, consistently with what the trial judge, Mr Justice Cole, had ordered, business interruption loss for that 12 month period. We understand from the submissions that have been made in respect of this motion by the appellant to this Court that it does not resist the reinstatement of that order and, in fact, consents to it.

GUMMOW J: Well, more than that. They say they had consented before the present motion was filed.

MR SIMPKINS Yes, and we do not dispute that. Can I turn to the second aspect.

TOOHEY J: Can I just ask you, Mr Simpkins, what effect would that then have on the present order of this Court?

MR SIMPKINS: It would require an alteration into the order which sets aside entirely the orders made in that paragraph of the Court of Appeal's orders.

GUMMOW J: It is not much good working off the Australian Law Journal Report. It sets out the orders incompletely.

MR SIMPKINS: I had not appreciated that, your Honour.

GUMMOW J: It does.

TOOHEY J: It only runs as far as order 5.

BRENNAN CJ: But if we add the words "and paragraph 3(a)(iii)" following the words "paragraph 2" in order 2 of this Court, does that cover the point?

MR SIMPKINS: It does, your Honour, thank you.

Could I turn to the second aspect, which is the costs ordered in this Court to date. The Court reserved liberty to the parties to make submissions about the costs before the Court of Appeal and before the trial judge and about those matters I propose to say nothing today because I seek no variation of any order in respect of them. But the Court did order that the costs of this appeal be paid by the respondent to the appellant and I do seek a variation to that order.

There are relevantly two issues that arise in respect of the application that I make in that regard. The first issue is whether I have made out an appropriate case for reconsideration by this Court of the order. Secondly, if I have, whether, having regard to the submissions that we put forward, any alteration to the order would be appropriate. The application is brought in reliance upon the slip rule in Order 29 rule 11. If need be, we also rely upon this Court's undoubted jurisdiction to vary its own orders when they have not been entered, upon an appropriate case being made out. We rely in that regard on authorities such as Autodesk v Dyason [No 2].

TOOHEY J: Is that a variation that you seek if the order made by the Court presently stood unamended or is it an order that you seek only in the event that you obtain some other variation of the order of this Court?

MR SIMPKINS: It is a stand-alone application that we make independently of any other application.

TOOHEY J: And the slip that you point to in that regard?

MR SIMPKINS: We say two things, but so far as the slip rule is concerned it is clear that the authorities permit that rule to be availed of where, through the inadvertence of counsel, a particular point is not made. In summary, what we do say is that the success on the proviso (i) point could not have been anticipated for reasons I will develop in a moment and that, therefore, there was inadvertence of counsel, understandable inadvertence, to address the Court on what costs consequences should follow in the event that the Court upheld the appeal on proviso (i).

BRENNAN CJ: What does it matter is it was proviso (i) or proviso (iv)?

MR SIMPKINS: It matters quite significantly. The submissions that we put in the written outline, and which I would wish to develop is simply this, that before the trial judge, the insurer specifically resiled from any reliance upon proviso (i). The point was not argued before the Court of Appeal. Obviously in the course of debate before this Court there was a reference to proviso (i) and ultimately proviso (i) formed the foundation of the majority judgment in this Court, permitting the insurer to be successful on that ground.

We would say that, notwithstanding the fact that perhaps the concession was not clear, nevertheless there was a statement made by counsel, Mr Rayment, appearing on the appeal which would not have raised for consideration during the course of the debate on the appeal the question of what should happen in terms of costs if proviso (i), not hitherto relied upon, was the foundation of the insurer's success. So we say that that is the slip. There are circumstances in which it is perfectly understandable that Mr Jacobson who appeared for my client on the appeal did not deal with the question of costs. He could not reasonably have anticipated success on proviso (i) and we say we have been denied the opportunity to say what we would like this Court to have regard to on proviso (i).

So we say it is either a slip or, if it is not a slip, that relevantly we have not had the opportunity to be heard and, consistently with authorities like Autodesk v Dyason [No 2], we should be permitted to make that application. Of course, in the event that I am permitted to make it, there does then follow for consideration the question of - - -

BRENNAN CJ: Well then, go ahead and make it.

MR SIMPKINS: Thank you, your Honour. I think I can put it very briefly because I do not really want to repeat orally things that I have put in the written outline. The concession which was put during in the course of this appeal by my learned friend, Mr Rayment, is the concession which appears in the transcript at page 73. Justice Gaudron asked this question, between lines 20 and 25:

Do you go so far as to say by virtue of provision (i) on page 244 that they cannot, in the circumstances that have happened, get more than the indemnity value?

Mr Rayment says:

No, none of it, certainly not, because there is a breach by the insurer on the assumption with which I approached the matter which would disentitle it from relying on proviso (i). I accept that.

And then there is another question and the answer is given to make it perfectly plain that what the insurer was presenting as its case to this Court, at least, was reliance upon proviso (iv).

Now, the Court ultimately took the view when it came to write its judgment that that concession was not sufficiently clear in all the circumstances to preclude the Court from dealing with the appeal ultimately on proviso (i) but the point of taking the Court to this transcript is that it would be understandable, in those circumstances, if the respondent to the appeal, my client, did not turn its mind to what the consequences should be if this insurer, never having previously relied upon proviso (i), should succeed in this Court on proviso (i).

We have given the Court a reference in the written outline, paragraph 12, to those parts of the appeal books that make good the proposition that at no time prior to the hearing of the appeal in this Court was proviso (i) relied upon. We have given your Honours the reference to that fact by Mr Justice Cole in his judgment, and it is also self-evident from the grounds of appeal and the judgments of the majority in the Court of Appeal, references to which have been given. Unless the Court would wish me to, I will not take the Court to the references in the appeal book to that material.

So, we say that there is a circumstance in which the Court should give consideration to the application to either the slip rule or, alternatively, exercise its inherent power to amend its own orders. As to whether the Court should undertake that task in the event that it is persuaded that it is an appropriate occasion to at least consider it, we have put in paragraphs 9 to 14 in our written outline the reasons that we say the costs orders should be varied to provide one of two alternatives; either for the respondent to the appeal to have its costs of the appeal to this Court or, alternatively, for there to be no orders for costs before this Court.

The two brief points that we make and I, having articulated them, will not seek to develop them any further, is that the appellant insurer succeeded in this Court on a point that it did not take below and, indeed, which it did not take before this Court and, secondly, that when special leave was granted the basis upon which leave was granted was that, if you like, this was an industry test case which had ramifications of considerable significance for the insurance industry.

BRENNAN CJ: But there was no condition imposed on that on special leave.

MR SIMPKINS: No, I accept that, your Honour.

BRENNAN CJ: And if the proceedings are here in which the insurer is claiming to limit its liability in some way and succeeds in having its liability limited to precisely the extent that it is sought, but on a different basis, why then ought it be refused costs, focusing not on the grounds that led to the relief but to the relief sought and obtained?

MR SIMPKINS: Obviously, it is only a matter that is to be taken into account of and different views may be taken of the significance of it in different cases but the reason why, in other cases, it has been regarded as, if you like, at least a potentially significant matter that should reflect itself in different orders as to costs is that if. the point is articulated and if it is taken before the trial judge and before the Court of Appeal then the matter may never obviously get to this Court. So, in a sense, if it was raised in a timely way in lower jurisdictions, the need for this appeal to proceed and for it to be determined on that basis may never have arisen. We just say that that is a reason why this Court should either make an order for costs in our favour or, alternatively, make no order as to costs. Being perfectly candid about it, there is no doubt that along the judicial chain this case has gone at some stage, namely before this Court, there has been success by the insurer and there has been a failure by my client. But we say the highest order to be made reflecting that is that there be no order as to costs of the appeal in these circumstances.

Can I turn lastly to the third matter which, in may respect which, in many respect, is the most significant point we seek to agitate on the current application. Can I turn first to the orders made by the Court of Appeal and identify those orders which have been set aside and which we would seek to reinstate. The first order that we seek to have reinstated is at page 580 in volume 2 of the appeal book. It is order 3(a)(iv). In terms, it is a declaration that:

the appellant is liable to pay general damages to the respondent in respect of its breach of contract.

It does not assist by identifying which breach. Then we also seek, because it is related to that order, the reinstatement of the order in paragraph 3(b)(i) which appears at the top of page 581. Could I immediately confess, in this regard, that the notice of motion is deficient because all it refers to is the first order but, logically, if the Court was with us on this application, there would also be a reinstatement of the order at the top of page 581.

What I would wish to do, but only briefly, is to take the Court back to the trial judge's decision and also to the judgments of the majority in the Court of Appeal in an endeavour to make good this proposition about general damages. The proposition that I hope to bear out by taking the Court back to those judgments is simply this, that the order relating to general damages arises from the appellant's wrongful refusal to acknowledge liability and make any payments in a timely way in respect of the first fire, being the fire which occurred during the currency of the policy. Now, I cannot say that that is all the order related to because, quite clearly, the trial judge and the Court of Appeal took the view, albeit for varying reasons, that there was a breach of a statutory policy, amongst other things. But I do wish to make good the proposition that the order extends at least to general damages arising from the first fire, in respect to a breach relating to the first fire. Now, if that proposition be correct - - -

BRENNAN CJ: What was the breach?

MR SIMPKINS: The breach was refusal to acknowledge liability, that is alleging - your Honours might recall this was a case where, when the claim was made, there was an allegation by the insurer that it was arson. So there was a breach shortly after the claim was made.

BRENNAN CJ: The breach consisted of what, denying liability?

MR SIMPKINS: Denying liability, yes, your Honour.

BRENNAN CJ: What is the contractual term which required it to admit liability?

MR SIMPKINS: There is no express contractual term requiring it to admit liability but both in this Court in a passage of this Court's judgment that I will take your Honours to if need be and also before the Court of Appeal and the trial judge it was accepted that the obligation under the policy that the insurer had was relevantly twofold: (a) to acknowledge liability and (b) to make payment in a timely way. Now, I had not quite completed my answer to your Honour's question. We rely on those two breaches, that is the failure to acknowledge liability but also the failure to pay in a timely way. That second failure is a bit easier to deal with because this Court has said, a little bit differently from the way the trial judge resolved it, that the failure whenever it occurred had certainly occurred by no later than 30 October 1992, being the termination date of the period of insurance cover. At that time the premises were not reinstated, there had not been a payment, so there is a breach as at that date in respect of payment pursuant to the event of loss, being the first fire.

BRENNAN CJ: What is it that entitles you to damages as against interest?

MR SIMPKINS: There is no doubt statutory provision for interest and, in many circumstances, that statutory provision may be sufficient. What entitles us to the claim for general damages, and the way it was put to the trial judge and accepted by him, was that because of the failure to pay money there was no remedy which was capable of being attended to in terms of reinstating the Club's premises. It does not matter whether one puts that in terms of reinstatement in the full sense urged upon this Court or just repair, but it was not possible to put the premises back into a state where they were functioning as a Club. This was a Club which traded, which earned profits. His Honour the trial judge found that it was earning net profits at the rate of about $14,000-odd a month.

Now, under the consequential loss provisions of the policy referred to by me earlier as a business interruption loss component of the policy, was covered for 12 months but at the end of the 12 months the Club still had not been repaired because no payment had been made. The evidence was that it did not have the financial wherewithal to attend to any repairs itself. If you like, the foundation factually of the claim for general damages is that without either the acknowledgment of liability and/or a payment of a sum of money, nothing could be done to the premises to put them into any state where they could be, like, resurrected to become a trading concern.

BRENNAN CJ: Can you point to any precedent in which damages have been awarded for non-payment of an amount due and payable under a contract for the payment of that sum?

MR SIMPKINS: Yes, your Honour, they were referred to in the decision of the trial judge and also are referred to in the decision of the Court of Appeal. I cannot from memory cite the reference but there are several cases referred to both in the judgment of the trial judge and also by the Court of Appeal which were cited by us in support of the proposition.

BRENNAN CJ: For my part, you had better show me.

MR SIMPKINS: If your Honour pleases. Perhaps it would be convenient to deal with them in the order first of the trial judge. The trial judge deals with it at page 431. Your Honours will see at page 431, commencing about line 20, his Honour accepts the proposition:

There is authority which establishes that, in addition to the contractual entitlement to payment.....any additional interest.....insured may recover additional damages for breach of contract -

and refers to several cases and he adopts that view of the law.

In the judgment of the then learned President of the Court of Appeal, the same authorities or some of them are referred to, commencing at page 486, about line 20, there is a reference to the:

Court was referred to examples where, in the application of -

general principles of contract law -

general damages had been awarded -

and then over, on the following - - -

GAUDRON J: What are those general principles that result in an award of general damages?

MR SIMPKINS: His Honour is referring to the general principles of contract law. I think that is a reference, your Honour, back to what appears at page 486, about line 5, and what his Honour seems to have in mind is the principle in Hadley v Baxendale and the remoteness of damage as the general contractual principles and then what he seems to be saying at the portion of the judgment that I have directed attention to is that insurance contracts have been treated - his Honour recognises, as being subject to those same general contractual principles, and then he goes on at page 487, between lines 10 to 15, to cite authority in support of that proposition.

GUMMOW J: This is a claim for a liquidated sum.

MR SIMPKINS: It is a claim for a liquidated sum pursuant to a contract of insurance. If one postulates a breach of the obligation to pay the liquidated sum then, consistently with what this Court said in Hungerfords v Walker, a claim for general damages, in our submission, would be available on appropriate facts being demonstrated. There is nothing sufficiently special about an insurance policy to mean that the principles in Hungerfords v Walker do not apply.

Can I just say this about the way the matter was argued on appeal. What Mr Jacobson put on the part of my client on the appeal was that, consistently with Hungerfords v Walker, my client would be entitled to recover these sorts of damages. We had two points put against on that part of the case. The first point was that exclusion 9 precluded it. I will take your Honours to exclusion 9 in a moment. The second was that there was no breach because in order for there to be a breach, my client had to elect whether it chose indemnity value or reinstatement and it had not made that election.

Now, the short answer to that last point is that this Court decided that the election was unnecessary, that there did become a time where prior to 30 October 1992 this insurer was obliged to make a payment of money because the obligation had crystallised, that obligation being one to provide indemnity in the circumstances rather than reinstatement. It was not submitted to your Honours that Hungerfords v Walker did not apply to policies of insurance and that general damage were not capable of being ordered.

BRENNAN CJ: It does not seem that Hungerfords v Walker is referred to in the courts below, is that right?

MR SIMPKINS: Sorry, is your Honour saying it was or was not?

BRENNAN CJ: Was not.

MR SIMPKINS: I have taken your Honours to those passages that I think deal with the question and, from recollection, neither of those passages dealt with Hungerfords v Walker. Can I just remind your Honours, though, of something which does appear in this Court's judgment. In the majority judgment, and there is a reference to this part of the judgment on page 5 of our written outline, paragraph 6(g), the Court noted in the majority judgment - - -

GUMMOW J: Whereabouts in the ALJR report?

MR SIMPKINS: Sorry, it is at page 326 between letters B and C, left column. My point in referring to this part of the judgment is merely to make good the proposition that when the matter was debated before this Court there was no issue between the parties that, consistently with Hungerfords v Walker, one could get general damages for a breach of a policy of insurance. The only issues argued on this appeal were whether this claim made by us for general damages was precluded by special condition 9 of the policy or whether no breach had occurred because it was necessary for my client, the insured, to make an election before there could be any breach.

So my submission is that the Court should, if you like, not be dissuaded from following the course that we urge now, namely of referring the matter back for general damages in circumstances where it was never argued before this Court that they could not be ordered as a matter of general principle. The exclusion 9 which - - -

GUMMOW J: The declaration in the Court of Appeal is hardly in satisfactory form.

MR SIMPKINS: It is not the most enlightening order that your Honours will have ever seen. I am not too sure who ultimately would take responsibility for that. I suspect it was a draft provided for the Court by the parties. But it certainly does not identify with precision, as perhaps it should, what the breach was.

GUMMOW J: It does not identify at all.

MR SIMPKINS: I accept that entirely, your Honour. Just having referred to exclusion 9, can I go briefly to it before I go back and try and make good the proposition that I started with, which is how we got general damages in the first place from the trial judge and the Court of Appeal. Exclusion 9 your Honours will find in volume 1 of the appeal book at page 250.

TOOHEY J: Just before you do that, Mr Simpkins, are you saying that before this Court nothing was said by counsel for the insurer that suggested any opposition to a claim for general damages?

MR SIMPKINS: I am saying the only opposition we had to the claim was twofold, and it was exclusion 9 and also the fact that there had been no election yet made by the insured that the election was necessary before there could be an obligation to pay, therefore there was no breach. It was only those two points. There was no challenge before this Court to the proposition that we advance in our written submissions and had put orally that we were entitled pursuant to authorities like Hungerfords v Walker for general damages following on from delayed payment under this policy.

Can I turn to exclusion 9, since it has been subject to some brief reference. It appears at page 250 in volume 1. Your Honours will see that exclusion 9 precludes:

consequential loss of any kind including consequential loss due to delay -

et cetera. The thing to observe about exclusion 9 is that it commences at really the top of the "Perils Exclusions", page 249 between lines 5 and 10. The introductory words to be read with that paragraph 9 are:

The company shall not be liable under Sections 1 and/or 2 in respect of:-

and then your Honours go to 9, consequential loss. So what this is is a restriction on the right of recovery pursuant to the policy of insurance. It says nothing at all about recovery of general damages for breach of an obligation to pay this under the policy. That was the point which we made on the appeal and we rely on what Mr Jacobson said about that matter in the transcript. I will give your Honours a reference to that. It is transcript page 64, lines 15 to 20, where Mr Jacobson said, after a reference to that clause:

That simply prevents the insured from claiming consequential loss otherwise than in accordance with section 2 -

that is of the policy -

but it does not preclude the insured from making a claim for general damages for breach of contract on the part of the insurer. And there was a breach of contract because the insurer failed to pay within a reasonable time and, indeed, failed to honour the policy within a reasonable time.

I think your Honours have been provided by my learned friend, Mr Rayment, with the parties' outline of written submissions to this Court on the appeal.

Your Honours will find that is right but the outline of submissions prepared by Mr Jacobson for my client specifically relied upon Hungerfords v Walker in paragraph 14, page 3. In the appellant's submission which your Honours also should have, the general damages submissions are contained in paragraphs 5 and 6 on page 3. Paragraph 5 is the exclusion 9 point where I have just been directing remarks to and paragraph 6 is the "no breach because no election" point, but no submission was put to this Court either in the written outline or orally that one could not get Hungerfords v Walker damages for delayed payment.

BRENNAN CJ: I notice at page 65 the period which was identified by the trial judge as the occasion of the breach by non-payment was before the third fire, that is 9 January 1993, is that right?

MR SIMPKINS: It was all before the first fire.

BRENNAN CJ: That is the date in which the payment ought to have been made.

MR SIMPKINS: Where is your Honour reading from?

BRENNAN CJ: Page 65, line 17.

MR SIMPKINS: Yes, I see your Honour's reference there. I will have to go back and check the date. What his Honour the trial judge found was a breach of the policy of insurance in failing to make a timely payment.

GUMMOW J: But his Honour took a different view, did he not, as to what was the term of the policy and renewal questions and so on?

MR SIMPKINS: A different view to this Court's view?

GUMMOW J: Yes.

MR SIMPKINS: Very much so, but his Honour had an earlier date, that is, from recollection, earlier even than 9 January 1993, as the date by which payment had to be made and now this Court has varied that and held there was a breach. It has not identified precisely the date of the breach other than it was a breach which occurred by no later than 30 October 1992.

I have digressed a little. Can I really just go briefly to the judgment of the trial judge and then to the judgments of the majority in the Court of Appeal to try and make good the general proposition that I articulated earlier which is the that the general damages award reflects, if not entirely, at least substantially an award for general damages relating to the first fire.

BRENNAN CJ: Could I just ask you this in relation to exclusion 9. If that is said to be in some way limited to section 2 liability, why is it that exclusion 9 does not, in terms, cover non-payment by the words "lack of performance"?

MR SIMPKINS: In many respects, this is not a happily worded policy.

BRENNAN CJ: I am not interested in whether it is happily worded, just the meaning of the words that are there.

MR SIMPKINS: As I understand your Honour's point, one goes to section 2, there is no reference to lack of performance.

BRENNAN CJ: But in exclusion 9 there is. What does it mean?

MR SIMPKINS: The short answer is I cannot tell your Honour what it means.

BRENNAN CJ: Why does it not mean non-payment?

MR SIMPKINS: Because at the end of the day your Honours no doubt have to give a sensible common sense construction to this policy and make it work and my short answer to your Honour is that notwithstanding the curious lack of correlation in some respects to what appears in 9 and what appears in section 2, that it is clear that the self-evident purpose of these exclusions is to cut down the obligation under the policy itself. It does not purport to be a provision which restricts or excludes or modifies in any way rights at common law.

Now, no doubt, in the ordinary course of events, exclusion clauses these days consistently with Dalgety Futures would be read according to their common meaning but, still, in the case of ambiguity they will be construed adversely to the insurer. What we say in respect of exclusion 9 is if there is any lack of correlation, if there is an ambiguity about what it does, one should give effect primarily to the introductory words which make it plain that this is cutting down the obligation under the policy. It is not purporting to modify, restrict or otherwise deal with rights arising outside of the policy and very clear words, in my respectful submission, would be required before the Court would come to the view in an insurance policy that that effect should be given to the words.

BRENNAN CJ: It is clear enough that some meaning has to be given to them and the question that you raise is whether or not the issue of the insurer's liability in damages for non-payment should be referred back to the Supreme Court.

MR SIMPKINS: Yes, your Honour.

BRENNAN CJ: So the question then is, is there anything to refer back to the Supreme Court in the light of exclusion 9.

MR SIMPKINS: I accept that. Exclusion 9 was argued before this Court and if the Court, contrary to the submissions I have put, form the view that exclusion 9 provided an absolute answer to the claim for general damages, then there would be nothing to refer back. I would be repeating myself if I said anything further as to the construction that we urge. Primarily we say if there is an element of confusion or ambiguity, it would be resolved adversely to the insurer and one would give primary effect to the introductory words which make it plain that it cuts down indemnity, it does not cut down common law rights.

BRENNAN CJ: Yes.

GUMMOW J: Now, this declaration of the Court of Appeal - if your submissions were accepted, it would require amendment, would it not? What is the breach of contract? You say the breach of contract is failure to pay by a date at least being 30 October 1992, is that it?

MR SIMPKINS: Yes, but we also rely upon the breach by the insurer in its failure to acknowledge in a timely way that it was liable pursuant to the policy. What this Court said was that the obligation of the insurer was twofold: to make a payment and to acknowledge liability. That is in the report at page 320 letter C, right column. The Court said:

The fundamental obligations of CIC under the Policy after the occurrence of the first fire were, within a reasonable time of the receipt of the claim (which was made promptly), to acknowledge liability and then to pay the liquidated sum -

So the breaches, we say, are twofold. It is the refusal to recognise - - -

GUMMOW J: When is the first breach committed?

MR SIMPKINS: The refusal to acknowledge?

GUMMOW J: Yes, what date?

MR SIMPKINS: I do not have the date at my fingertips, your Honour. It would be no later than the purported cancellation of the policy by the insurer. Whilst my learned friend is addressing the Court I will extract that date, but that would be the absolute outer limit of what it could be, because the cancellation was on the alleged ground of implication in the fire which, ultimately, the trial judge held to be without foundation. That will be a date much, much earlier than 30 October 1992.

I turn to the judgment of the trial judge to make good the proposition that his Honour was dealing with general damages flowing in part from the first fire. Firstly, page 429, line 15, his Honour refers to the submissions put to him on behalf of the Club, namely that there were:

damages arising from the failure to pay those monies being reinstatement costs and business interruption costs.

The allegation being breach by not paying within a reasonable time. Then at page 430, between lines 10 and 15, his Honour records that:

The Club has argued that, had the insurer accepted its obligation under the policy to pay the cost of reinstatement occasioned by the first fire -

I emphasise that was the way the submission was put to him -

the premises would have been reinstated prior to the expiration of that twelve month's period of business interruption.

So that was the claim for general damages with which the trial judge was dealing. Then at page 435 his Honour, after lengthy analysis, comes to express an ultimate conclusion as to the claim for general damages. At page 435 between lines 5 to 10 he says this:

The issue is whether the general damages being sought for loss of trading profits after January 1993 were of such a nature as may reasonably be supposed to have been in the contemplation of both parties at the time of contract as a probable result of breach of it. Such damages, in my view, would include loss of profits from inability to trade if the insurer wrongly failed to acknowledge -

first breach -

its obligation to reinstate, and to pay -

second breach -

the costs thereof.

So the point we make about the way the trial judge resolved it was that he was dealing with a submission put to him in respect of the first fire and he found a breach consisting of both the failure to acknowledge in a timely way and failure to pay in a timely way.

In the judgments of the Court of Appeal the matter is dealt with by the then learned President at page 487, picking up a few lines before line 20 his Honour says:

In the present case it would appear not unreasonable to suppose that, at the time of entering into the contract between the appellant and the club the parties had, objectively, in their contemplation that if the appellant seriously, unreasonably and unjustifiably -

we emphasise these words:

delayed the acknowledgment of its liability to indemnify the club in respect of its losses, the club would inevitably suffer loss of trading profits as a consequence.

Then, over on page 488 his Honour holds, at about line 5:

the club is entitled to general damages.....in respect of loss of trading profits from the period 9 January 1993 -

He accepts at line 10, at least tentatively, the trial judge's calculation of $14,478 per month. Then he says a few lines below:

The parties should therefore calculate the entitlement to such damages to the date of payment. In the event of a dispute the matter will need to be referred back to the Commercial Division to resolve the dispute conformably with this Court's judgment.

So, the basis upon which the trial judge dealt with it, and the learned President dealt with it, was breach of failure to acknowledge in respect of the first fire.

His Honour Justice Priestley, I will not take the Court to it, deals with general damages at pages 499 to 501, but does not really indicate any different view or different approach.

Can I just endeavour to summarise the submission before sitting down. We would say, consistently with this Court's judgment there was a breach of the policy of insurance in refusing to acknowledge liability and refusing to make payment. That there was no challenge in this Court to the availability of general damages for breach of policy other than those two respects I have identified. Exclusion 9, which was one of the challenges should not succeed for the reason I have put in relation to the proper construction of the policy.

In my respectful submission, unless this Court can be satisfied that there is no conceivable way that any general damages could have flowed from the breach, the appropriate course would be to reinstate the Court of Appeal's orders for - - -

GUMMOW J: It would not be, really, because they are to a degree incomprehensible. Have you any minute of order 4 which you.....It is not our function to sit here and draft these things.

MR SIMPKINS I have indicated that I will extract from the appeal book the date of the wrongful cancellation of the policy and I will draft a form of order but it will be an order which seeks a reference back to the Commercial Division for assessment, general damages flowing from breach of contract accurring on or about the date of the wrongful cancellation of the policy.

TOOHEY J: But, are you saying that it is the function of this Court, on this application, to resolve exclusion 9? From your point of view I suppose you are content for the whole matter to go back. It would only be if this Court formed a clear view and decided it was appropriate to form a clear view that exclusion 9 apply, that the question of general damages might disappear.

MR SIMPKINS Yes, your Honour. I do not urge resolution of exclusion 9 upon this Court, but it is understandably raised by my learned friend, Mr Rayment. It has been raised by some members of the Bench, and I have endeavoured to dealt with it, but there is no necessity for it to be dealt with. The whole question of general damage can be referred back, and if that provides the answer, no doubt some judge of the Commercial Division could say so.

BRENNAN CJ: There is a preliminary question, too, is there not, and that is whether there is a liability in general damages of the Hungerfords v Walker kind?

MR SIMPKINS In principle, yes. In this case we would say no, having regard to the way it is being conducted.

BRENNAN CJ: That may be so, but is that not a question which should be referred back?

MR SIMPKINS It should be referred back because really none of the earlier courts had dealt with that point, if it is one which is argued.

BRENNAN CJ: The question is whether, consistently with the judgment of this Court, there is any, and what, breach of contract on the part of the insurer and are there any, and what, damages flowing from that.

MR SIMPKINS Yes, your Honour. One of the difficulties in drafting an order of the kind Justice Gummow indicated would be appropriate, is that the date that the trial judge chose as the date of the breach is clear. With respect, it was really unnecessary, I suppose, having regard to the reasons that the Court gave, for it to determine precisely the date, and the only conclusion this Court reached on the date is that it was by no later than 30 October 1992.

BRENNAN CJ: Yes, but the date is material for the purpose of setting the commencing time for the assessment of damages, assuming the breach.

MR SIMPKINS Certainly.

BRENNAN CJ: But if we have to refer back to the question of breach, or no breach, then it is not for us to stipulate a time.

MR SIMPKINS Yes, your Honour, that would be quite right. Unless your Honours have any questions about the matters that I have put, they would be our submission. If your Honours please.

BRENNAN CJ: Yes, Mr Rayment.

MR RAYMENT: Your Honours, we start with the matter of order 7 in this Court. In our respectful submission the matters which my learned friend has raised about costs must not have been absent from your Honours' minds when your Honours made the order for costs which was made in this Court. We would respectfully submit that no occasion presents itself for the Court to revise or reconsider its costs order in the case.

Your Honours, special leave was not - it was certainly put on the basis that the form of policy in this case was a general industry form, but it was not put forward as an industry test case in any sense at all. Nor, as your Honour the Chief Justice pointed out, was any condition made at the time of the grant of special leave in the case.

It was suggested by my learned friend that if some submission about proviso (i) had been made in the courts below, this Court may not have been troubled with CIC v Bankstown Football Club. The way in which the matter was won by our learned friends before the trial judge was on the basis of a deemed renewed policy under section 58 of the Insurance Contracts Act 1984 . That has nothing to do with any question about proviso (i) or proviso (iv). The way in which it was won in the Court of Appeal was, ultimately, by Mr Justice Priestley agreeing with the learned President, as he then was, about a matter of construction of the policy which permitted the insured to recover, as a matter of construction, the costs associated with the third fire at these premises. Neither of those has anything to do, at all, with proviso (i) or proviso (iv) and, in our respectful submission, my learned friend's reasons for asking this Court to depart from order 7 on the basis on which it was put would not, we respectfully submit, persuade your Honours to change that order.

Your Honours, so far as the other matter is concerned, your Honours need to be told something about the way in which this case was put at first instance and then on appeal by the Club. Specifically eschewed, especially in the Court of Appeal and in this Court, was any claim for damages for repudiation of this policy by my clients. Your Honours might recall having referred to that.

GUMMOW J: Page 46 of the transcript.

MR RAYMENT: Yes. It sounds as if some attempt is now being made, with respect, to depart from such a stance.

BRENNAN CJ: No, there is not. That question of repudiation is a question of insistence upon the terms of the contract and the allegation that your party is in breach of it.

MR RAYMENT: If the matter is being put at large, the differences between what is now being asked by my learned friend and what his side abandoned here and below, is hard to - there would certainly be a lot of overlapping, if there is not identity. But, your Honours, what I was about to say was this: the way in which it was originally opened was as a claim for, primarily, a deemed statutory renewal. In the context of that, the judge was asked, not only to give the amount of business interruption that was due under the policy - that is for the first year - but also another year or more of the same kind of damages on the basis that if the reinstatement obligation alleged by the other side to have arisen, and notwithstanding the third fire, had been fulfilled, then trading profits would also have been available. Indeed, they might have said that under the deemed statutory policy there was a business interruption provision which they could have relied upon and for some reason the case was never put that way, although we commented on that fact in the Court of Appeal.

The way in which the learned judge dealt with it was unquestionably in the context in which it had been put, in our respectful submission. Mr Justice Cole - - -

BRENNAN CJ: Does this really touch the point, Mr Rayment? This Court has given its judgment as to the liability of the insurer under the policy, and that liability is, as the Court has declared it, assessed pursuant to provision (i), and that was the liability of the insurer to pay the Club the money thus assessed.

MR RAYMENT: Yes.

BRENNAN CJ: Well, it did not pay it.

MR RAYMENT: No.

BRENNAN CJ: Well, if it did not pay it, is it in breach of its policy by not paying it; in breach in the sense that that attracts a liability for damages?

MR RAYMENT: Yes.

BRENNAN CJ: In the light of this Court's judgment, the question is, is there a claim for damages?

MR RAYMENT: Our first answer to that is the claim that your Honour the Chief Justice has referred to as a matter of law under Perils Exclusion 9, which I want to come to. But, your Honours, what I was seeking to put was, that the only basis upon which this claim, this discrete part of this claim has previously been urged in this matter, is on the basis that my clients had an obligation to reinstate these premises as a result of the third fire. That is how it was originally opened; that is how it was dealt with - both by the trial judge and in the Court of Appeal. To put it forward now on the basis that my clients have an obligation to indemnify for the damage caused in the first fire, which was about, I forget - a quarter or a third of the building structure - a much smaller portion of it than was ultimately damaged. To put that on the basis of that, some general damages of the kind claimed below, ordered by the trial judge, and in effect, ordered in the Court of Appeal, although quantification was finally left to be ascertained by another judge, in our respectful submission is a totally new suggestion in this case.

BRENNAN CJ: Is that the right proposition? What was put below, as I understand it, is that the insurer is liable on ground X for Y dollars, and that was contested.

MR RAYMENT: Yes.

BRENNAN CJ: And ultimately, through the Court of Appeal and here, was successfully contested, and it was held that it was liable on ground A for B dollars.

MR RAYMENT: Yes.

BRENNAN CJ: Was it not also in issue, both below and here, that whatever the liability might be of the insurer, the insurer had failed to acknowledge it, and had failed to meet it. There had not been any tender of performance on any lesser basis. It would be the payment of half a million dollars on account at one stage, but no tender of performance of the obligation as it has now been found to be.

MR RAYMENT: No.

BRENNAN CJ: Why is it not a consistent claim that whatever the obligation is the insurer did not meet it and we are entitled to damages accordingly?

MR RAYMENT: If those reasons commend themselves to this Court, your Honour would make the order sought, or in substance in this notice of motion.

BRENNAN CJ: I am not saying what the result of it should be but simply - - -

MR RAYMENT: It has previously been pressed on a completely different basis, and your Honours, it has never been pressed, either at first instance or in the Court of Appeal or in this Court, on the assumption that the insured was merely entitled to the indemnity value in respect of the damaged property in the first fire.

GUMMOW J: They were never saying that. That was never their case.

MR RAYMENT: No, that was never their case; their case was a larger case.

GUMMOW J: That is right, but it has turned out that what they have is a smaller case.

MR RAYMENT: Right; but they did not say here, on the hearing of the appeal, they want to maintain the same claim that they made on the larger basis which would give rise to different questions of fact. They did lead evidence of damages at trial, on the larger basis. They never lead any evidence about what would have happened if - - -

GUMMOW J: On an alternative narrower basis in respect to this partial destruction.

MR RAYMENT: That is right. So, really, as a result now of the matter having been finally clarified here, the other side say, "We should be allowed to go back and lead further evidence", I suppose it is, at a trial, now some many years after the event about what would have happened in certain events, and what the parties would have expected to have happened in certain events. We would respectfully submit, if that had been raised here it would have been treated, in our submission, as something that was raised too late. It was open to them, if they wished to press this claim for damages, to lead the evidence on alternative basis, they did not do so. Now, after all this time, the matter having been clarified here, we would respectfully submit the Court would not allow such a matter to be raised for the first time here. It is in the category - - -

GUMMOW J: The substance of their case has really been based on total destruction and if they win on total destruction, the Club had to make good its claim about continued policy under the statutory renewal.

MR RAYMENT: Yes. You see, they had a mortgage over these premises - all kinds of different questions arise if there had been compliance with an indemnity earlier on. We really submit that at the end of the day, this claim boils down to one which, in the way in which it is now sought to be put, was never raised below, either at trial or in the Court of Appeal, and not raised here on the hearing of the appeal.

Can I go back to Perils Exclusion 9? We would respectfully submit that there would be no occasion to refer to the Court a question of what can only be described as consequential loss flowing from the failure to pay, consistently with this claim having been made under the policy, and pressed on the basis that the insurer was guilty of no repudiation. We would respectfully submit that the very kind of matter excluded by Perils Exclusion 9 is a claim of this nature. It is page 250 in volume 1 of the appeal book. The company had a liability only under sections 1 or 2 of this policy; there was no other section. My learned friend refers to the opening words, but they were comprehensive words, in our respectful submission. What is excluded then in 9 is:

consequential loss of any kind including loss due to delay, lack of performance -

GUMMOW J: I think what is put against you is that means delay by a third party not being a party to this contract. Likewise, performance.

MR RAYMENT: Lack of performance can only mean, in our respectful submission, lack of performance pursuant to this contract.

It is the very kind of claim now sought to be made which is in the nature of a business interruption claim. Section 2 of this policy was a classic form of business interruption cover, and that is the very kind of claim that is now sought to be pressed, in our submission. It is in the nature of a claim like that available under section 2 of this policy, although not framed in the same terms. So, he gets a year, as it were, pursuant to the policy, and notwithstanding Perils Exclusion 9, would get some further period for what can only be described as consequential loss, in our respectful submission. That is the very kind of claim that was excluded, in our submission, by Perils Exclusion 9.

Your Honours have Perils Exclusion 8 which makes it clear that this is to be an exclusive source of the liability of the company. The company does not attract to itself liability otherwise than pursuant to the contract.

BRENNAN CJ: Exclusion 8 can scarcely exclude liability for breach of the contract.

MR RAYMENT: No. I am not putting it any more than at a context to 9, your Honour.

BRENNAN CJ: Yes.

MR RAYMENT: I am not seeking to rely upon it individually.

BRENNAN CJ: Is this your proposition: that in order to get any damages for breach, those damages would have to consist of lack of performance of the kind which would have attracted liability under section 2, which does attract liability under section 2, but it is a limited liability, and the limitation is reached by section 2, itself?

MR RAYMENT: Yes, I accept that, your Honour. That is how we do put it.

BRENNAN CJ: That is a very interesting proposition, Mr Rayment, and it may well be right, but should we decide it? If it is substantially arguable.

MR RAYMENT: It was argued here during the hearing of the appeal, and in our respectful submission, no occasion would arise to - - -

BRENNAN CJ: It was clearly enough not decided by this Court.

MR RAYMENT: No.

BRENNAN CJ: If it is arguable, and was not decided by this Court, then two options are open. One is that the Court should now decide it for itself; the second is that it should be remitted to the Commercial Division of the Supreme Court of New South Wales, in the light of this Court's declaration.

MR RAYMENT: Yes. We would respectfully urge the former upon your Honours, but it is a matter for your Honours.

BRENNAN CJ: Yes.

MR RAYMENT: Those are our submissions, your Honour.

BRENNAN CJ: Do you want to say anything about the costs below, at all, Mr Rayment? That is before Justice Cole and the Court of Appeal.

MR RAYMENT: In our respectful submission, so far as the appeal to the Court of Appeal was concerned, the matter is really to be considered in the same category as the appeal here. The issues which arose in the Court of Appeal were substantially those which arose here and no others. In my submission, it would be curious if there were any different result as between the Court of Appeal and this Court. Your Honours, my learned friend points out something about proviso (i) and proviso (iv). There was no concession that proviso (iv) covered this matter by our learned friends. Their case was, this is a statutory policy deemed to be renewed, or it is a claim as a matter of construction of the policy following the dissenting judgment of Sir Garfield Barwick. There was no suggestion that this case would have been given up if proviso (i) had been put at the forefront of my client's case at any level.

So far as the learned trial judge is concerned, as we put in written submissions, the third fire, itself, led to evidence and submissions which occupied, at any rate, a third of the time before the learned judge on the second hearing before him. The first hearing before him, my clients do not seek to deal with the order for costs at all which was made by the judge. That was the arson hearing. There is no question but that my client should remain liable for those costs. The second hearing, we would respectfully submit, two choices really. We put in the notice of appeal a suggestion that this Court might remit to the Commercial Division the question of costs at first instance so that a judge can, as it were, look at the appropriate division of time and the like on the issues which were ultimately held here to be irrelevant. Or, alternatively, and I do not know if it is common ground or not, it may not be - we would submit that about a third of the time was wasted, and it would be appropriate to reduce the cost order of the plaintiffs for the first hearing. But, we would respectfully submit, in the Court of Appeal and here, the costs should go as they did in the judgment published.

BRENNAN CJ: I notice in the Court of Appeal the costs were divided, were they not?

MR RAYMENT: In the Court of Appeal we were given some relief, I think, from the general costs order because of partial success on one issue. But, if the order had been made there, as was made here, in our submission, we would have had the usual order for costs.

TOOHEY J: On the argument that you are putting, Mr Rayment, if the question of general damages went back to the court below, would those submissions in respect of the costs at first instance and the costs before the Court of Appeal that you have made remain unaltered?

MR RAYMENT: They would. The general damages has never featured large in - if you allowed an appeal on the basis of section 58 from Mr Justice Cole, but referred back damages to be dealt with at first instance, we would submit the appropriate order for costs would have been that the respondent pay the appellant's costs, and so here, we would respectfully submit.

GUMMOW J: What do you say, Mr Rayment, about orders 4 and 5 that were made here, that is to say, bringing in short minutes specifying the sum payable under the - - -

MR RAYMENT: Yes, we tried to and could not.

GUMMOW J: You cannot agree?

MR RAYMENT: We tried, and could not.

GUMMOW J: So, in other words, order 5 is operative?

MR RAYMENT: Yes.

GUMMOW J: So it has to go back anyway?

MR RAYMENT: Yes.

GUMMOW J: Thank you.

BRENNAN CJ: Yes, Mr Simpkins.

MR SIMPKINS Your Honours, I really have nothing in reply, but in response to your Honour Justice Gummow's question as to what date we would put the breach at, we would say the earliest breach is either a breach in April 1992, which is when the trial judge found enough time had been given to the insurer to investigate and to acknowledge liability - that appears from appeal book page 440; or, it dates from refusal to indemnify under the policy, which is 22 July 1992 - that appears from appeal book pages 362 and 388.

GUMMOW J: So, if the matter went back, they are the two dates you would be putting?

MR SIMPKINS Yes, your Honour.

BRENNAN CJ: What do you say about the question of the costs in the Court of Appeal, Mr Rayment's argument that the costs there really ought to be the same as the costs here? I am leaving aside your argument in relation to point 1 and point 4, but if you should have the order for costs against you here maintained, why should they not be maintained so far as the Court of Appeal is concerned? Why should you not have to pay them?

MR SIMPKINS There is a logical connection between the two. The principal point we put in opposition to revising the Court of Appeal's costs was the same submission I put to the Court today in respect to the costs in this Court - namely, success on a point that was not argued below.

BRENNAN CJ: Yes. In other words, whatever costs are made here should be the costs order governing the Court of Appeal?

MR SIMPKINS Can I say yes with this qualification: that is, your Honours may take the view that it would be appropriate, notwithstanding the history of this matter, that at some stage in the judicial chain my learned friend have his costs. In which case we would say you would give him his costs of the one occasion that he won. Since the point was not raised before the Court of Appeal, it would nevertheless still be appropriate to maintain that court's orders as to costs.

Your Honours should have had, pursuant to directions that the Court gave in its orders, a written outline in respect of the reserved questions being questions of costs in the Court of Appeal, and we would just rely upon the submissions we put in that document.

BRENNAN CJ: Yes.

MR SIMPKINS Thank you, your Honours.

BRENNAN CJ: The Court will adjourn briefly in order to consider the course that it ought to take.

AT 11.41 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.56 AM:

BRENNAN CJ: The order of the Court on the respondent Club's motion is as follows:

A. The motion is granted in part.

B. The order of this Court pronounced on 4 February 1997 is amended as follows:

Paragraph 2 of that order is to read as follows:

Save for paragraph 2 and paragraph 3(a)(iii) of the orders of the Court of Appeal, set aside the orders of the Court of Appeal and in lieu thereof -

(i) Declare that the appellant is obliged to pay to the respondent a sum representing the indemnity value of the damaged property at the time of the happening of the damage sustained in the first fire.

(ii) Remit to the Supreme Court of New South Wales the question whether the respondent has a claim for damages for breach by the appellant of the policy by reason of non-acknowledgment of its liability under the policy or non-payment of the amount it was liable to pay as declared in subparagraph (i) and, if so, the amount of those damages, if any.

(iii) Order that the appellant insurer pay three-quarters of the respondent Club's costs of the action up to and including the proceeding before Mr Justice Cole.

(iv) Order that the appellant pay one-quarter of the respondent's costs of the proceeding before the Court of Appeal.

(v) Order that the respondent pay three-quarters of the appellant's costs of the proceeding before the Court of Appeal.

(vi) Order that the amounts taxed or agreed to be paid under subparagraphs (iii), (iv) and (v) be set off and the balance payable by the party owing the balance to the other.

Paragraph 3 of the order stands.

Paragraph 4 is to read as follows:

Order that the parties have leave on or before 14 September 1997 to bring in short minutes specifying the sums payable pursuant to paragraph 2 of this order, other than costs, including interest under section 57 of the Insurance Contracts Act (Cth) from 30 October 1992 on such amount as may attract liability to pay interest under that section.

Paragraph 5 is to stand.

Paragraph 6 is deleted.

Paragraph 7 is to stand.

C. The respondent Club is to have its costs of the motion.

D. Otherwise the motion is dismissed.

The Court will adjourn to Melbourne and Sydney at 9.30 am tomorrow morning.

AT 11.59 AM THE MATTER WAS CONCLUDED